The Confederation of British Industry (CBI) has sounded the alarm over a deteriorating economic outlook, with businesses reporting weakened confidence and plans to cut both output and hiring. The concerns stem from tepid demand and the government’s decision to raise employers’ national insurance contributions (NIC), a measure expected to generate £25 billion annually.
Chancellor Rachel Reeves defended the policy, emphasizing the government’s commitment not to increase taxes on workers, but acknowledged the challenges for businesses. However, firms have criticized the NIC hike, arguing it worsens an already fragile economic environment.
Alpesh Paleja, the CBI’s interim deputy chief economist, expressed worry over the findings, stating: “There is little festive cheer in our latest surveys, which suggest the economy is headed for the worst of all worlds—firms expect to reduce both output and hiring, and price growth expectations are firming.”
The CBI poll, conducted with 899 companies between November 25 and December 12, revealed that economic growth expectations are at their weakest since November 2022, following the resignation of Liz Truss as prime minister.
Paleja urged the Labour government to bolster business confidence ahead of 2025 by reforming key policies such as the apprenticeship levy, occupational health incentives, and business rates.
With firms grappling with higher costs and sluggish demand, the government faces increasing pressure to stabilize the economy and create a more favorable environment for investment and growth.
